An amount of Rs. 10,000 becomes Rs. 12,100 in 2 years with annual compounding. What is the annual compound interest rate?
Correct answer: C. 10%
- A. 8%
- B. 9%
- C. 10%
- D. 11%
Explanation
The growth factor over two years is 12,100/10,000 = 1.21. Since 1.21 is equal to 1.10 squared, the annual compound rate is 10%. Dividing the total growth of 21% by two would not correctly account for compounding.
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